IN THIS
ISSUE
- Eyes on China:
Facing New Challenges
- The Furniture Learning Institute:
Re-skilling the Singapore Furniture Workforce
- The International Furniture
Fair Singapore 2004/21st ASEAN Furniture Show:
A Resounding Success!
- 2nd Furniture Design Forum
- Ministerial Visit
- Furniture Design Award 2005:
Discovering the Best and Budding Talents in Asia
- An Insight Into China Furniture
Industry
- US Anti-dumping Ruling: 11%
Or Less Duties for many Chinese bedroom factories
- Legal Column: Suspension of
Work in the Construction Industry
- Know Thyself, Know The Sandbox
That U Are Playing In
- SFIC 11th Golf Tournament 2004
Eyes on
China: Facing New Challenges
In May, the SFIC led a high-level delegation
on a mission to China. Ranked second in terms of world furniture
exports in 2003, China’s furniture manufacturing is
mostly concentrated in a few production areas, with the
Guangdong province being the largest, accounting for 38%
of China’s total furniture exports.
Led by Mr. Jerry Tan, SFIC Vice President
as well as Chairman of the Overseas Missions Organising
Committee, the delegation comprised of 26 representatives
from the SFIC Executive Committee, Economic Development
Board, International Enterprise Singapore, JTC Corporation
and SPRING Singapore.
The delegates visited Shenzhen, Dongguan and
Guangzhou with the following objectives:
• Understand the latest developmental
trends of the Chinese furniture industry, its structure
and success factors, and assess the relevance of these
factors to Singapore
• Strengthen contacts with relevant
authorities/businessmen
• Explore areas of business
collaboration, strategic partnership and joint venture
opportunities
Key observations and assessments include:
• The Chinese have made tremendous
strides in the design and manufacture of furniture to
date. Product quality has improved tremendously, through
the adoption of manufacturing technology know-how from
other developed countries. This will continue to fuel
China’s growth as a manufacturing base.
• The industry is fairly fragmented,
with a strong presence of foreign and more professionally-managed
companies from Hong Kong and Taiwan in Guangdong. Exports
are mainly driven by these foreign companies, while most
of the local manufacturers have little global presence
and produce mainly for domestic consumption. For instance,
in Dongguan, the association shared that Taiwanese companies
export about 90% of production and Hong Kong companies
export about 50%.
• While most local Chinese companies
are still lagging in design and branding, the Chinese
furniture associations and some of their bigger players
have recognized the need for the industry to move up the
value-chain and have dedicated resources for furniture
R&D.
A case in point, the Shenzhen Furniture Trade
Association have invested S$6 million in its new building
to provide services in product design and brand management,
development of new materials, production and processes,
consultancy, training, quality standard and certification,
etc. Companies such as the Hong Kong-based Hing Lee Group
prides itself with its own R&D team and 10 brands under
its portfolio to target the different market segments.
• The US anti-dumping ruling on wooden
bedroom furniture affects mainly foreign companies that
uses China as a production base for export, a majority
of which are located in Dongguan.
• With the anticipated removal of
import tariffs in 2005, market penetration of foreign
brands in the Chinese consumer market is expected to gradually
increase.
• The benefits of furniture clusters
to spur trade growth and provide the impetus for export
are apparent, as witnessed in Dongguan’s Houjie.
Apart from Dongguan’s trade expositions, the success
of Houjie is largely attributed to the critical mass of
furniture manufacturers and supporting players located
within the same precincts to attract foreign buyers.
• Permanent showrooms for trade buyers
are integral components of the furniture manufacturers’
business model. All the plants that were visited operate
in-house showrooms. These are designed to sell lifestyle
concepts to both domestic and international business buyers,
rather than for mere product displays.
• The Guangzhou Jisheng Wellborn Furniture
Exhibitor Center is a huge furniture and furnishing chain
store that sprawls 120,000 sqm over 10 halls. Managed
by the Jisheng Wellborn Group (and with a network of seven
others such centres in China), it houses over 100 quality
brands from the Chinese players and targets both end consumers
and business buyers. Services provided to the tenants
include marketing, consultancy, logistics and distribution
services.
The Chinese furniture industry has grown at
a tremendous pace and emerged as the 3rd largest furniture
producer in the world, after the US and Italy. All of this
was achieved in a very short span of time. It needs no great
imagination to forecast the future competitive scene, as
China’s furniture industry continues to develop and
surge forward.
As the saying goes, if you can’t beat
them, join them. There are many windows of opportunities
that our Singapore players can leverage on to make it good
in China. Other than quality and professional management
practices, superior design and branding would give us a
long-term competitive advantage. The delegation unanimously
agreed that mid to large-sized Chinese companies with little
global presence are potential partners for Singapore companies.
Besides tapping on China as a production and sourcing base,
local champions should start to tap into the vast China
market, which is witnessing a growing demand for higher
quality and better-designed furniture, as a result of increasing
affluence in the country.
Despite the challenges ahead, SFIC strongly
believes that our players can secure a niche for themselves
in China.
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The
Furniture Learning Institute: Re-skilling the Singapore
Furniture Workforce
From Left: Mr Low Hock Meng (SPRING Singapore),
Mr James Koh (SFIC President),
Mr Lim Peng Hun (Singapore Polytechnic), Mr Neo Sia Meng
(FLI Chairman),
Mr Khoo Onn Theam (OTi Consulting), Ms Sharon Tan (Singapore
Workforce Development Agency)
The Furniture Learning Institute (FLI) was
one of the outcomes of the Furniture Industry Capability
Upgrading Programme (ICAP), SFIC’s strategic blueprint
for the industry’s future growth.
Why
a Furniture Learning Institute?
So what will the FLI do for the industry? Like many other
industries, the furniture industry faces a number of challenges.
Customers are more demanding in terms of getting information
and enjoying higher quality at lower prices. As such, industry
players need to ensure that their workers are able to handle
marketing, distribution, logistics, product design and development,
communications and lifestyle needs with finesse. Moreover,
the furniture industry is becoming more and more global.
With international delivery and the internet,
customers in Singapore can choose to buy from the global
marketplace instead of being constrained to players in Singapore.
In terms of technology, the industry needs to keep abreast
of the increasingly sophisticated technology used. Upgrading
and re-skilling become a necessity rather than a luxury.
This is where the FLI can take the lead to help mould an
internationally competitive, high skilled workforce to take
on the challenges of the new world.
One of the immediate goals of the FLI is to
get workers up to speed in knowledge and skills through
structured and industry-specific learning and training programmes.
These programmes include effective communication, warehouse
management and operations, delivery skills, visual merchandising
and furniture product knowledge. Mr. Neo Sia Meng, Chairman
of the FLI, emphasizes: “The main focus of these
courses is to ensure that in-service workers keep current
and thus would not be made redundant. Appropriate and timely
training must therefore be provided to equip in-service
workers with new knowledge and skills to meet changing job
requirements.”
The FLI’s mid-term goal would be to
formulate specialized certifiable training and learning
courses, and establish industry standards and benchmarks.
The long-term goal would be to provide courses for higher
learning and establish Singapore’s furniture research
capabilities, as well as Singapore, as the industry’s
Knowledge Hub.
Graduants & Management team from Four Star Industries
Pte Ltd, together with
Mr Chan Soo Sen, Minister of State for Education (third
from left) and Mr James
Koh, SFIC President (fourth from left)
What the Furniture
Learning Institute offers
For Employees
The first three programmes being conducted under the auspices
of the FLI is the CREST (Critical Enabling Skills Training)
modules on communication works and adaptive people strategies
for sales effectiveness. Companies can choose to send a
few of their employees or have a specially conducted programme
for a class comprising of its own employees. So far, 11
courses have been successfully conducted and a series tailored
for industry players such as Novena, Kingsmen, Design Studio,
Star and Four-Star, etc.
Four Star Industries Pte Ltd, showed their
support by sending all his staff for the courses. They were
split into three sessions for the hands-on course that profiled
participants’ listening behaviour using the DISC (Dominance,
Influence, Steadiness and Conscientiousness) model.
The words that Mr. Neo Sia Meng, Executive
Director of Four-Star used to describe his employees’
reactions to the course are “revelations” and
“mindset-shift”. He related that his employees
had revelations about themselves and their co-workers. They
experienced a mindset shift in the sense that after the
course, they learnt to look at the big picture, and not
just in terms of how things affect them as individuals.
In fact, he was pleasantly surprised when his staff came
back from the course and asked him if there were any more!
Attendees from other companies also found
the Communication Works course a breath of fresh air. Ms
Patricia Wong from the Finance Department of Kiat Lee Industries
Pte Ltd commented, “It was interesting the way
the course was organized. The trainer gave many examples.
The course helped me in my communications with others. It
gave me a better understanding of my co-workers.”
Similarly, Ms Kok Sia Yew from the Purchase
Department of V Mark Woodcraft (S) Pte Ltd found that the
communications course helped her gain a new perspective
on her relationship with customers. “The course
helped us to provide better customer service. We learn to
deal with difficult customers. Now, when we receive a complaint,
we take time to explain the problem to the customer whereas
previously we would not have seen the need to,” said
Sia Yew.
Sia Yew’s experience was boosted by
the fact that she attended the course with like-minded people
from the same industry. She observed that listening to other
industry players sharing their experiences has been beneficial.
And of course, networking at the course yielded useful contacts
that she could tap on in the course of her work.
Fellow course participant, Mr Ricky Seah,
Senior Sales Executive at Koda Ltd, agreed that attending
the course with other furniture industry workers has been
a big plus point and an advantage that FLI has over other
generic training providers. “It’s the under-one-roof
concept where we gain from each other’s experience
while sharing our own,” added Ricky.
For Employers
Just as employees found the course beneficial, management
likewise found that it pays to send their employees to the
FLI’s programmes.
According to Mr. James Goh, Executive Director
of Supreme Furnishing Centre Pte Ltd, “There is
value in upgrading employees’ skills. After working
in the industry for a long time, employees get rusty so
they need a booster especially now when consumers are more
demanding. We need to equip staff with the proper knowledge
and better service”.
Besides their employees acquiring much needed
skills and knowledge, employers like Mr. Goh found that
sending their staff for FLI’s programmes makes financial
sense since they can avail themselves for the Employee Training
Relief Fund allocated under the SFIC 2nd Member Assistance
Scheme to help relief temporary replacement cost when staff
are sent to FLI for training.
The FLI training programmes also enjoy enhanced
SDF-subsidy by the Singapore Workforce Development Agency
(WDA). For example, if a worker has ‘A’ levels
and below, he is entitled to enhanced SDF funding of $10
per hour instead of the usual $5 per hour. If the worker
is above 40 years of age, he enjoys full funding for the
course.
An exciting
time ahead
They say that membership has its privileges and this is
true for SFIC members, especially when it comes to the FLI.
Mr. Neo confided that FLI is currently working with the
WDA to embark on a National Continuing Education and Training
Framework (NCETF) for the Retail Sector to further identify
critical skills crucial to the industry. This plan, coupled
with the funding for the programmes and the fact that these
skills-upgrading courses are organized by the industry for
the industry, means that the furniture industry is in for
a very exciting time.
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The
International Furniture Fair Singapore 2004/21st ASEAN Furniture
Show: A Resounding Success!
The International Furniture Fair Singapore
2004/21st ASEAN Furniture Show (IFFS/AFS 2004) was a resounding
success.
Throughout Asia, IFFS/AFS 2004 has been recognized
as the leading furniture trade fair. Held at the Singapore
Expo from 1st to 5th March, the event again boasted global
representation from 29 countries.
More than 25,000 pieces of furniture and furnishing
products from 450 exhibitors were showcased, providing a
diversified and unique range of design-led offerings. The
exhibitors occupied more than 50,000 square metres of floor
space at the Singapore Expo. The vast majority of the exhibitors
expressed that they were very satisfied with the results
from the show.
In terms of visitors, 17,126 professionals
attended the fair, which was an increase of 4.5% compared
to IFFS/AFS 2003. Visitors hailed from 102 countries spread
across all continents of the world.
During the show, exhibitors generated US$225
million of spot orders. It was estimated that follow-on
sales for IFFS/AFS 2004 would reach US$1.9 billion.
“I am very pleased to note that the
fair attracted many prominent exhibitors from all over the
world, and that generally, they had done good business.
This is an indication that Singapore is living up to its
reputation as a major furniture hub in Asia,” says
Mr. James Koh, President of the SFIC.
“IFFS/AFS 2004 has once again reaffirmed
that it is indeed the ideal ‘East meets West’
business platform for the furniture industry. We are now
eagerly looking forward to the 2005 show, which we planned
to be bigger than 2004, offering an even more impressive
variety of products on display,” says Mr. Jerry Tan,
Chairman of the IFFS/AFS 2004 Organising Committee.
Taking a broader perspective, the success
of the IFFS/AFS has also reaffirmed that the global furniture
trade outlook has recovered from the devastating impact
of the Gulf War and SARS. In fact, the furniture industry
is growing again, due to the burgeoning consumption markets
in the Middle-East and European economies, as well as heavy
volumes of furniture imports from the United States.
“The IFFS/AFS is a good window for
Decoro. We met up with some of our existing customers, as
well as, several new ones. It is also one of the best fairs
in the region. At this fair alone, we secured more than
30 new customer accounts including major ones from the United
Kingdom, Australia and New Zealand. We also had confirmed
orders from all our existing customers.”
Mr. Massimiliano Ortolan, Associate Sales Director
of Decoro Ltd (Italy)
“The best show we’ve
ever had in five years! There are many opportunities to
meet potential and genuine buyers in countries which we
lack representation. The trade-player traffic is excellent
and it is always a pleasure to be in Singapore. It continues
to be the most important show for both exhibitors and buyers
in the region.”
Ms Jennell Sonsteng, Regional Sales Manager of Sauder
Woodworking (USA)
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2nd
Furniture Design Forum
|
|
For the second consecutive year, the Furniture Design Forum provided
budding designers, entrepreneurs and design students
a very conducive platform to exchange insights and
ideas on design during IFFS/AFS 2004.
Supported by IE Singapore, Designers
Association of Singapore, Interior Design Confederation
Singapore, Singapore Institute of Architects, American
Hardwood Export Council, IKEA, as well as the Organisers
for the Paris International Furniture Fair, the event
was attended by 249 participants. It saw a 2½-fold
increase in attendance compared to 2003.
Three internationally renowned speakers
as well as one local design talent were invited to
share their insights and knowledge on the latest trends
in the world of furniture design at the Forum.
|
• “Multi-Dimensional Innovations”
by Mr. Lars Engman, IKEA’s Chief Designer
• “Design Trend – The Next Millennium”
by Mr. Christophe Pillet, and internationally renowned French
designer who has worked with Martine Bedin and Philippe
Starck before founding his own design office in 1993
• “Furniture Design – A Maker’s
Perspective” by Mr. Philip Koomen, one of UK’s
most distinguished furniture designers/makers
• “Beyond Design” by Mr. Andrew Pang,
local designer and Young Business Ambassador 2003 under
the Australia-Singapore Young Business Ambassador Program,
organized by the Singapore International Foundation
“The role and importance of design cannot
be downplayed,” said Mr. Simon Ong, Chairman of SFIC
Design Development Committee. “With growing access
to better technology, industries are increasingly competing
at equal price and functionality. What better way can one
carve our new markets and create a competitive edge than
through good design?”
Good design also requires inspiration. By
organizing this Forum, the SFIC aims to not only promote
the understanding and use of design as a strategic and competitive
tool, but also to inspire everyone to think creatively.
More significantly, it serves to establish innovation and
design as a key value-add to Singapore designs to enhance
the status of the local furniture trade in the global arena.
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Ministerial
Visit
24 June 2004 was a significant day for SFIC
when Dr Lee Boon Yang, Minister for Information, Communications
and the Arts (MICA) visited the Council, as part of his
series of visits to design-related industry associations
in Singapore.
Coordinated by DesignSingapore Council and
hosted by Kingsmen Creatives Pte Ltd, the Minister was accompanied
by 14 other MICA officials, including Mr. Yatiman Yusof,
Senior Parliamentary Secretary, Dr Tan Chin Nam, Permanent
Secretary, Mr. Lim Soo Ping, Deputy Secretary and Mr. Edmund
Cheng, Chairman of DesignSingapore Council.
The afternoon’s programme included a
fruitful dialogue session with 18 SFIC Executive Committee
members and industry leaders on the challenges and issues
faced by the industry players, a presentation on SFIC’s
Furniture ICAP to develop Singapore into an International
Furniture Hub, as well as a tour of Kingsmen’s facilities
and the Design Gallery that was put up to showcase the industry’s
product capabilities. The winning entries of FDA 2004 was
also displayed for the visit.
To round off the occasion, another 46
members attended the SFIC Networking Session held in conjunction
with the event.
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Furniture
Design Award 2005: Discovering the Best and Budding Talents
in Asia
The highly coveted annual Furniture
Design Award (FDA) organised by the Singapore Furniture
Industries Council returns to inspire new design talents
and showcase the unique creations of Asia’s best creative
minds in March 2005.
Encouraging contestants to explore the theme,
“New Asia – Creating Furniture of
Daring, New Age and Ethnic Inspiration”,
FDA 2005 is now open for applications and design submissions.
The theme aims to unveil a new design era in Asia with design
concepts and innovations that boast a strong “Asian”
influence.
“Essentially, we want to encourage
and develop an environment where we can be proud of the
‘Design & Made in or for Asia’ label and
have industry players world-wide give due recognition to
it as well as create a demand for such creations. We also
want the global furniture players to recognise that the
FDA is where Asia unveils our trend-setting masterpieces,
adding more pomp and substance to the international furniture
design scene, said Simon Ong, Chairman of SFIC’s Design
Development Committee.
Consonant with SFIC’s aim to brand
Singapore as a global furniture design hub, FDA
2005 will continue to present opportunities for
talented designers to network with industry players and
spearhead careers in addition to being a platform for design
education and a launch pad for innovative designs in Asia.
A case in point, two winners of previous FDAs – Jeremy
Ong and Han Kiang Siew found industry partners from Australia
and Singapore respectively to explore the commercialization
of their winning designs.
Jeremy, winner of the 2004 Young Designers
Category said: “I’ve been participating in this
event for the past six years. The FDA encourages us to stretch
our creativity and work processes beyond what’s deemed
to be the limitation of standard product and consumer design.
The international recognition bestowed on designers for
our innovations and originality excites me and makes me
want to do better every year.”
Kiang Siew, winner of the 2003 Students Category,
added, “The FDA has given us the unique opportunity
to discover innovative and practical concepts. I hope with
the FDA, more Asian designs can gain recognition on the
furniture design world map.”
FDA 2005 consists of three
categories:
- Students Category: open to full time
students in any local tertiary institution, art institution,
junior college, pre-university or secondary school.
- Young Designers Category: open to Asia
Pacific citizens, permanent residents and those on work
permit below the age of 35 as at 1 March 2005.
- Open Category: open to participants from
all over the world, either on an individual or company basis,
with entries having been manufactured and launched commercially
in the market
Entries to FDA 2005 will
be judged on their conformity to the theme, creativity and
innovation, form, functionality, choice of material, marketability
and environmental friendliness.
The closing date for the Students and Young
Designers categories is on 1 October 2004 and the Open Category
is on 1 December 2004. The finals will be held on 28 February
2005. Results will be announced on 1 March 2005.
FDA 2005 will be held in
conjunction with one of Asia’s premier design-led
furniture trade shows – the International Furniture
Fair Singapore 2005/22nd ASEAN Furniture Show (IFFS/AFS
2005) – from 1-5 March 2005 at the Singapore Expo.
The event is supported by DesignSingpore
Council, Economic Development Board, SPRING Singapore, International
Enterprise Singapore, Designers Association of Singapore,
Interior Design Confederation Singapore, Singapore Institute
of Architects and America Hardwood Export Council.
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An
Insight Into China Furniture Industry
A fast
growing industry
The Chinese furniture industry is growing at a phenomenal
pace with an increase of production by 23.7% and 37.1% for
export in 2003.
Total production value for 2003 reached US$24.6
billion. Out of this, US$7.33 billion was exported. In the
same period, imports of furniture totaled US$195 million.
Though also on a growing trend, the import volume is nonetheless
insignificant for a US$19 billion market.
According to statistics complied by the China
Light Industry Information Centre, China now boasts over
50,000 furniture enterprises employing some 45 million people
(both direct and indirect workers).
|
2003
Chinese Furniture Exports (Total: US$7.33b)
Top 14 Export Markets |
| USA |
US$
3.78b |
Holland |
US$
0.112b |
| Hong
Kong |
US$
0.90b |
Korea |
US$
0.097b |
| Japan |
US$
0.61b |
France |
US$
0.083b |
| UK |
US$
0.33b |
Spain |
US$
0.077b |
| Canada |
US$
0.19b |
Saudi |
US$
0.069b |
| Australia |
US$
0.18b |
Italy |
US$
0.068b |
| Germany |
US$
0.16b |
Taiwan |
US$
0.067b |
|
2003
Exports by Product Categories |
| Product
Type |
Exports |
| Wooden |
US$
2.80b |
| Metal |
US$
0.98b |
| Plastic |
US$
0.12b |
| Bedding |
US$
0.05b |
| Others |
US$
3.00b |
| Furniture
Parts |
US$
0.30b |
Several characteristics of the current furniture
industry in China include:
1. Escalation of fixed assets investment.
Some regions have made the furniture industry their core
industry. There is an increase in city development and industrial
parks as well as an upsurge of furniture malls on an extensive
scale. New establishments of enterprises also bring about
an increase in demand of new facilities.
2. Increase of investments from overseas
enterprises. The focus is turning towards the Chang
Jiang triangle districts and coastal prefectures and cities.
This influx of capital is instrumental in pushing China
towards being the world’s furniture manufacturing
centre.
3. Development of new products that
are more design-oriented. Speciality products and
patented items are fast making their appearances. Products
now see more variety in patterns and colours. While production
volume is on the rise, so is environmental consciousness.
4. Shaping of the economy in speciality
regions. This had prompted the development of small
and medium enterprises and hastened the pace of structural
changes within the organizations.
5. Stronger competition led to lower
but stabilized market prices. Exports are looking
good with a faster pace of acceleration. In the international
arena, China-made furniture has the edge due to competitive
pricing.
The fast pace of development has also brought
about challenges such as: more intense competition for lower
end furniture as well as inadequacy of resources in design,
trained experienced management. Lack of technology and low
productivity levels are also issues which need to be addressed.
In addition, wooden bedroom furniture exports also face
the problems of anti-dumping rulings by the United States.
Main
furniture production regions
There are four main production clusters in China:
1. The Pearl River Delta Region, South
of China (Shenzhen, Dongguan, Guangzhou and Shunde)
This region attracts a high volume of Hong Kong’s
and Taiwan’s furniture enterprises and currently ranks
as China’s largest manufacturing and export base.
Altogether, it accounts for a third of the country’s
total output value and half of China’s total export.
Guangdong still ranked the province with the
highest furniture exports in 2003. Total exports from Guangdong
amounted to US$2.76b (38% of China’s total figures),
an impressive 32% increase over 2002.
2. The Yangtze River Delta Region,
East of China (Shanghai, Jiangsu and Zhejiang)
Acclaimed as China’s second largest furniture manufacturing
base, this cluster is well known for greater product quality
and is very well versed in commerce.
Market analysts believe that in the next 3-5
years, more foreign furniture industry players from the
United States, Germany and Japan etc will move towards China
and will choose to base themselves in the areas of Jiangsu,
Shanghai and Zhejiang.
3. The North China Region (Beijing,
Tianjin and Shandong)
Characterised by typically larger enterprises, this region
forms a very significant manufacturing base. Its proximity
to the capital gives it an advantage of added market capacity.
4. The Northeast China Region (Shenyang
and Dalian)
These areas together form the fourth furniture region in
Northeast China. It is endowed with timber supply and is
generally known for its strong foundation and successful
industrialization programme.
Market
trends and expected changes
The SARS outbreak in China during early 2003 saw a shift
in the Chinese export scene for the American and European
markets. The United States started to seek replacements
in the neighbouring countries of Mexico and Canada while
Western Europe set their eyes on the Eastern European suppliers.
Nevertheless, the industry continued to enjoy huge growth,
averaging an annual increase of 15% for the past two decades.
During the first two months of 2004, China’s
export grew by 37% over the same period last year. Mr. Jia
Qingwen, President of the China National Furniture Association,
cited two main reasons for growth. Firstly, America is the
biggest market for China’s furniture exports and many
American furniture traders imported larger than normal amounts
ahead of the preliminary ruling of the anti-dumping duties.
Some enterprises serving the American market were reportedly
working overtime during January and February to meet orders
and many said the order books were full through to May.
Secondly, the fast speed at which the furniture markets
in the European countries have been developed has pushed
up production and exports as well.
Imports for the first two months alone also
grew by a massive 58% to US$112 million. One of the main
reasons cited is that some traders postponed imports last
year to take advantage of the reduced tariffs in 2004.
In terms of local demand, there is no obvious
increase as the lower end products are still in an oversupply
situation. There is also insufficient investment in production
for higher quality furniture products. This is regrettable
as the strongest demand is for upper end furniture, a factor
that is driving up imports of furniture. As such, the local
furniture market is in a natural growth state, which is
more or less stabilized.
Based on the above analysis and market observations,
the following challenges and opportunities may appear for
the Chinese furniture industry in the next couple of years.
1. Tougher times ahead for many of
the small and medium enterprises
• The major problem would be an overstock
situation, given the weaker demand but excess supply of
most products which are of the same design and quality levels.
The overstock is estimated at 30-40 billion Renminbi each
year. If this situation continues without due improvement,
a large number of the small and medium enterprises will
be forced to close.
• Many of the Chinese manufacturers
are OEM businesses. This equates to unstable orders, where
prices are pushed to the minimum by the middlemen, and hence,
a very low profit margin.
• Taiwanese enterprises that have relocated
their bases to China are mainly exporters. They are more
familiar with the export markets, more established in terms
of distribution channels and invest in their own branding.
Although these Taiwanese companies are also into OEM businesses,
they cut a better deal compared to the local suppliers.
Nevertheless, OEM businesses are always controlled transactions.
With a more competitive international landscape and increase
in labour costs in China, profit margins will be affected.
This market environment inevitably increases the pressure
on the local players who are trying all means to expand
the local market. The result is more competition in the
local scene.
• The China market is undoubtedly very
alluring and this results in everyone wanting a share of
the pie. As China enters the international scene, foreign
companies will soon be granted similar “rights”
as their Chinese counterparts. With their advanced production
capabilities and management level, the Chinese companies
are certainly in for a tough competition.
2. Company restructuring
• Currently, the furniture industry
comprises mainly small and medium private enterprises, with
main furniture industrial areas in Shenzhen, Dongguan, Guangzhou,
Shunde, Zhongshan, Wenzhou, Wuhan, Zhejiang, etc. The productivity
level of most firms remains low; they produce similar products
of lower quality and emphasize on price competition rather
than carving out their own specialization. As the competition
in the local furniture industry intensifies, company restructuring
and mergers will be commonplace.
3. Market Structure
China will continue to be a manufacturing resource, as it
is still the largest and fastest growing market in the world,
with the richest resource in skilled labour.
• As long as import taxes on furniture
are not totally eliminated, many foreign companies will
still choose to invest directly in China to substitute restricted
sales of imported goods.
• Economists have concluded that as
long as China maintains a steady growth rate of 8%, and
as long as the Chinese labour force is constantly entering
the market competition, the large-scale shift of international
investments towards China may continue for a very long period
of time.
• The furniture industries in the United
States and Europe will definitely look for investment opportunities
or build new production bases in China. One good example
is the expansion of Swedish furniture chain “IKEA”,
which has more localized products being made in China. This
shift will not only improve the standard of the local furniture
production but will spark a new cycle of competition within
the local industry.
4. Growth opportunities
Despite the challenges, there is definitely a lot of room
for China to grow. Positive indicators include:
• 19% of the China population, or 200
million people, are “middle income” as defined
in China, with fixed assets between US$18,000 and US$30,000.
This group is increasing at 1% per year.
• US$55 billion in foreign investment
in 2003 is generating employment and income.
• The housing market is expected to
grow 20% a year for the next 5-6 years.
• Retail sales are increasing at 9%
to 10.5% a year.
• Currently, import tariffs on furniture
have lowered to 6%. By 2005, furniture exports will enjoy
zero tariff.
• Government investments of US$14 billion
in the 2008 Olympics in Beijing and related projects are
expected.
Over the next few years, if efforts are channeled
towards improving the standard of technology, design and
strategic management to build development models that correspond
to that of the China model, the entire industry will see
an elevation in the level of standard within the next one
or two decades. This will put the China furniture industry
into the ranks of the big international players.
Source: Jia Qingwen, Xu Meiqi and You
Qijun, Editor of China Furniture, FDM Asia, CSIL Milano
China Light Industry Information Centre
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US
Anti-dumping Ruling: 11% Or Less Duties for many Chinese
bedroom factories
In the U.S. government’s largest dumping
decision against China, the US Department of Commerce (DOC)
has made an initial ruling in June 2004 against Chinese
manufacturers who are dumping wooden bedroom furniture in
the US market and imposed preliminary duties on those imports
ranging from 4.9% to 198.08%.
On 29 July the DOC subsequently made a decision
to lower the preliminary duties for 21 Chinese manufacturers
and raised duties for two others.
To be paid by importers as a percentage of
the product’s value, the duties will vary depending
on which Chinese factory makes the wooden bedroom furniture.
The breakdown is as follows:
China Bedroom Duties
| Status |
Duties Levied |
| Mandatory respondents |
The 7 biggest Chinese manufacturers have widely
varying duties assigned:
- Dongguan Long Dong 7.04%
- Lacquer Craft 4.9%
- Shing Mark Enterprise 6.59%
- Rui Feng / Dorbest 11.85%
- Markor 8.38%
- Tech Lane 29.72%
- Starcorp Furniture 30.52%
These heavy hitters account for 40% of the US$1.2
billion Chinese bedroom imports to the U.S. in 2003. |
| Section A respondents |
With the latest revision in July,
102 companies, accounting for over 40% of imports,
face a duty of 10.92%
To qualify for the 10.92% duty, these companies must
show that they do not have what the DOC considers
undue support from the Chinese government, whether
by law or in practice. |
| All-China rate |
Another 16 companies that had applied
for Section A status, but were denied, face a duty of
198.08%. All other factories that fail to apply Section
A will also face the all-China rate. |
Impact of the anti-dumping
ruling – shake up of market share, prices? Opportunities
for others?
It is too early to declare an absolute winner
in the furniture industry’s anti-dumping battle, but
it is clear that a number of players will suffer losses
as a result of the preliminary duties imposed. The biggest
losers are of course the small Chinese manufacturers, tagged
with duties of 198.08%. Representing 20% of China’s
furniture exports, most of these factories will likely cease
bedroom-making operations and redirect exports to other
nations or relocate their production to plants subjected
to the Section A rate.
Some of China’s largest manufacturers
are likely to gain market share in the long run as companies
with favourable rates soak up business from those facing
prohibitive duties. However, even these Chinese factories
that benefit from the lowest duty rates will not emerge
unscathed because China now faces growing competition from
new furniture plants in other Asian countries. In Vietnam,
for example, more than 15 million sq ft of furniture factory
space will be built this year, according to industry sources.
If US buyers are looking for alternatives
to China for wooden bedroom furniture, some neighbouring
Asian manufacturers say they are ready for additional bedroom
orders that could come their way. A case in point, Philippines-based
case goods manufacturer, Pacific Arts & Décor,
bought six bedroom production machines from Japan and said
it planned to spend about US$1 m for related equipment.
Pacific Arts & Décor had one bedroom in its line
in early March and was looking to add more.
Tomisho (a Malaysian case goods manufacturer),
Malaysia-based DZI Craft Woodwork and other manufacturers
also received enquiries from importers seeking alternate
bedroom sources during the recent March and April trade
shows. DZI subsidiary Poh Huat, which makes bedroom, office
and entertainment furniture in Vietnam, also said its Vietnam
plant is large enough to take on more orders.
Despite the resources, some companies might
not be able to meet all the demands, said Mr. Ernie Koh,
Senior Vice President of Koda Ltd (Singapore-based casual
dining and bedroom manufacturer that has its factories in
Malaysia, Vietnam and China). “Our existing customers
are concerned about the potential duties involved and are
looking for double sourcing,” said Ernie. “But
I don’t know if other countries can absorb their volume.”
Analysts say the result could be further price
erosion on furniture that will put added pressure on profit
margins for both exporters and retailers. While pricing
will become an issue, logistics and quality control issues
of shifting production to other plants and other countries
will also have to dealt with. This will have a broad effect
on the supply chain.
Anti-Dumping ruling spurs
all sides to “fight on”
In the meantime, “fight on” is
the battle cry for both proponents and critics of the anti-dumping
duties that will not be firmly established until December
2004.
As part of the process, DOC investigators
will visit plants in China to verify claims that factory
owners provided through written responses during the preliminary
investigations. The final determination from the International
Trade Administration (ITA) of the DOC is due on 5 November
2004. If the ITA determines dumping is taking place, a final
determination of injury is due on 20 December 2004 from
DOC. If both rulings are in the affirmation, an order on
final duties will be signed on 27 December 2004.
The preliminary decision announced in June
also means that the US customs will require the importer
of record to post a cash deposit or bond (at the rate assigned
to each of its Chinese sources) to cover import duties until
the final determination is made.
Chinese manufacturers and US retailers expect
duties to do down, not up. But some furniture industry analysts
caution that the final duties will be higher. Whatever outcome
it might be, the harsh reality is that many companies will
soon need to adjust prices and business strategies to cope
with the proposed duties.
Tariff
Table
Wooden bedroom furniture is just the latest product imported
from China that faces an anti-dumping tariff.
| Product |
Annual imports |
Tariff |
| Wooden bedroom furniture |
US$1.2b |
4.9% to 198.08% |
| Televisions |
US$276m |
5% to 78% |
| Iron pipe fittings |
US$20m |
7% to 111% |
| Saccharin |
US$3.6m |
up to 330% |
China's share of wood furniture
exports into the US
| |
2003 |
2002 |
2001 |
2000 |
| U.S. total imports of wooden furniture |
US$8.4b |
US$7.6b |
US$6.36b |
US$6.3b |
| China's share |
42% |
38% |
30% |
26% |
Top furniture product categories
shipped from China to the US in 2003
| |
Shipments |
Change from
2002 |
| Miscellaneous wooden furniture |
US$1.7b |
19% |
| Wooden bedroom, including beds |
US$1.2b |
42% |
| Metal outdoor seats |
US$0.6b |
15% |
| Metal household furniture |
US$0.5b |
19% |
| Upholstered seats and chairs, wood frame |
US$0.5b |
60% |
| Other seat parts |
US$0.2b |
64% |
| Wooden chairs |
US$0.2b |
-1% |
|
TOTAL |
US$6.8b |
19% |
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Legal
Column: Suspension of Work in the Construction Industry
In the first segment of this series, we looked
at legal issues concerning the Construction Industry in
general and in particular, at various types of payment terms.
In this second segment, we will look at your entitlement
in relation to suspension of work or termination of contract
for the supply of goods or services in the event of non-payment.
Let us examine the scenario where there is
no master contract. Instead, the contractor orders goods
and services from a supplier through a series of purchase
orders. The crux of the problem lies in whether or not the
supplier has communicated the acceptance of the purchase
orders. If the supplier has not, and since no contract exists,
then the supplier is not bound to supply goods and services
as the purchase orders are not sealed by contracts in the
event that the supplier has yet to be paid for last deliveries.
However, if the supplier were to communicate
his acceptance of the purchase order, a contract is crystallized
and he is bound to supply the goods and services specified
therein. To enable him to suspend or stop deliveries pursuant
to a series of purchase orders, the supplier should insert
a clause reserving himself the right to suspend or stop
delivery of goods and services if past deliveries were not
paid in full. This clause should be included in writing
at the time when the supplier accepts the purchase orders.
The construction industry frequently employs
standard contracts. For example, the standard form Main
Contract by which Owners appoint Main Contractors contains
a clause which gives the Main Contractor the right to terminate
the Main Contract if the Owner defaults in payment of a
certified sum wrongfully.
Similar provision is however not rendered
to the nominated sub-contractor. This brings us to the second
scenario where nominated sub-contractors have to continue
to provide the goods and services to the Main Contractor
even if the latter were to default in payment. In order
to stop such unfair future deliveries, the nominated sub-contractor
has to prove that the Main Contractor has no intention of
paying for future deliveries. In most cases, it is impossible
to prove this intention.
In the United Kingdom and Australia, the Parliaments
have implemented legislation to empower contractors (and
this includes Domestic and Nominated Sub-contrators) the
right to suspend work for non-payment. It was said that
the right to suspend work redressed the serious imbalance
in bargaining position between Owner and Main Contractor
and between Main Contractor and Sub-contractors.
As a result of the lobbying efforts of the
Singapore Furniture Industries Council (together with other
associations in the Six + 6 Trade Alliance), the Minister
for National Development announced in Parliament on 15 March
2004, the Ministry’s intention to introduce legislation
similar to that in Australia on the right to suspend work
in Singapore. The new law passed will redress the serious
imbalance in the bargaining position of Sub-contractors
in Singapore – and in turn prompt Owners to assist
Sub-contractors in resolving their disputes with Main Contractors
so that the project works are not interrupted or worse,
suspended.
This article was contributed by Mr Ng
Yuen of M/s Ng & Koh, Advocate & Solicitor
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Know
Thyself, Know The Sandbox That U Are Playing In
“Hands-on” Workshop
by SFIC’s Furniture Learning Institute (FLI)
The two half-day workshop, held from 29 to
30 July 2004 was attended by senior management from 17 companies.
The 26 participants came with one common objective –
How to build Successful & Enduring Enterprises by understanding
their Current Business Model, the Industry Business Model
and how the game is played by the different industry players.
The workshop was conducted by Mr. Andrew Sng,
Senior (Asia) of Decision Processes International (DPI)
– an international firm that specializes in empowering
top management teams to think more critically, innovatively
and decisively to transform their businesses.
“I’m glad that SFIC had taken
the initiative and effort to continuously provide its members
with the opportunity to upgrade their business development
skills. The whole workshop had been very enlightening and
relevant,” said Mr. Jason Hong of Cellini Design Center
Pte Ltd.
This is the first FLI’s Workshop
Series for senior and top management personnel. The next
half-day workshop will focus on “Strategise for the
Future, not the Present” on 8 October 2004. Please
contact Joyce Lee @ 6568 3251 or email joyce@singaporefurniture.com
for more details.
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SFIC
11th Golf Tournament 2004
From Left: Andrew Ng (SFIC 1st Vice President),
SL Chia (Pico Art International),
Eric Tham (UOB Bank) and Chow Tat Kong (SPRING Singapore)
A total of 147 avid golfers spent an enjoyable
afternoon at the SFIC 11th Golf Tournament held at the exclusive
Singapore Island Country Club on 6 August 2004.
Led by Mr. Sim Kah Choon, Chairman of the
Golf Tournament Organising Committee, this very well-received
annual event provided a good opportunity for members to
network, establish new contacts and enjoy a good round of
golf.
Proudly sponsored by Malayan Motors, this
year’s “Hole-In-One” prize was an attractive
Jaguar S-Type 2.5L V6SE, which was recently launched in
April. Unlike last year, no one managed to drive home this
exciting car this time round.
Nevertheless, spirits were high and all participants
commented that they were very impressed with the tournament’s
excellent organization.
SFIC would like to take this opportunity to
thank all participants and sponsors for their strong support
and contribution and looks forward to participation by members
in next year’s tournament.
Hole-In-One Sponsor:
• Malayan Motors
Main Sponsors:
• Pico Art International Pte Ltd
• UOB Bank
Gold Sponsors:
• Arch Chemicals Coatings Singapore Pte Ltd
• Cellini Design Center Pte Ltd
• Cityneon Exhibition Services Pte Ltd
• Jim Logistics Management Pte Ltd
• OCBC Bank
• Singapore Furniture Association
• Singex Venues Pte Ltd
• Times Business Information Pte Ltd
Silver Sponsors:
• Boncafe International Pte Ltd
• Bigwin Golf Academy
• Chicago Florist
• DBS Bank
• Grand Bigwin Pte Ltd
• Keow Hong Services Co Pte Ltd
• LACOSTE
• Meiji Seika (S) Pte Ltd
• Nobel Design Holdings Ltd
• Orient Explorer (S) Pte Ltd
• Public Utilities Board
• Singapore Pools (Private) Limited
• Singapore Press Holdings Limited
• Starhealth Pte Ltd
• Studio 2000 Pte Ltd
• Suntec Singapore International Convention Exhibition
Centre
• The Oriental, Singapore
• Trans-Link Exhibition Forwarding Pte Ltd
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DISCLAIMER
Whilst every care is taken to ensure accuracy of the information
on this newsletter, SFIC accepts no liability for damages
caused by misinterpretation of information, expressed or
implied, within this newsletter. No part of this newsletter
may be reproduced in any form or by any means, without prior
permission in writing from SFIC.
